Correlation Between SOVEREIGN TRUST and NIGERIAN EXCHANGE

Can any of the company-specific risk be diversified away by investing in both SOVEREIGN TRUST and NIGERIAN EXCHANGE at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SOVEREIGN TRUST and NIGERIAN EXCHANGE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SOVEREIGN TRUST INSURANCE and NIGERIAN EXCHANGE GROUP, you can compare the effects of market volatilities on SOVEREIGN TRUST and NIGERIAN EXCHANGE and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SOVEREIGN TRUST with a short position of NIGERIAN EXCHANGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOVEREIGN TRUST and NIGERIAN EXCHANGE.

Diversification Opportunities for SOVEREIGN TRUST and NIGERIAN EXCHANGE

0.27

Correlation Coefficient

SOVEREIGN TRUST  NIGERIAN EXCHANGE

Modest diversification

The 3 months correlation between SOVEREIGN and NIGERIAN is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SOVEREIGN TRUST INSURANCE and NIGERIAN EXCHANGE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIGERIAN EXCHANGE and SOVEREIGN TRUST is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SOVEREIGN TRUST INSURANCE are associated (or correlated) with NIGERIAN EXCHANGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIGERIAN EXCHANGE has no effect on the direction of SOVEREIGN TRUST i.e., SOVEREIGN TRUST and NIGERIAN EXCHANGE go up and down completely randomly.

Pair Corralation between SOVEREIGN TRUST and NIGERIAN EXCHANGE

Assuming the 90 days trading horizon SOVEREIGN TRUST INSURANCE is expected to under-perform the NIGERIAN EXCHANGE. In addition to that, SOVEREIGN TRUST is 1.27 times more volatile than NIGERIAN EXCHANGE GROUP. It trades about -0.01 of its total potential returns per unit of risk. NIGERIAN EXCHANGE GROUP is currently generating about 0.07 per unit of volatility. If you would invest  2,275  in NIGERIAN EXCHANGE GROUP on August 31, 2024 and sell it today you would earn a total of  235.00  from holding NIGERIAN EXCHANGE GROUP or generate 10.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SOVEREIGN TRUST INSURANCE  vs.  NIGERIAN EXCHANGE GROUP

SOVEREIGN TRUST INSURANCE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOVEREIGN TRUST INSURANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, SOVEREIGN TRUST is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

NIGERIAN EXCHANGE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NIGERIAN EXCHANGE GROUP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NIGERIAN EXCHANGE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SOVEREIGN TRUST and NIGERIAN EXCHANGE

The main advantage of trading using opposite SOVEREIGN TRUST and NIGERIAN EXCHANGE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOVEREIGN TRUST position performs unexpectedly, NIGERIAN EXCHANGE can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NIGERIAN EXCHANGE will offset losses from the drop in NIGERIAN EXCHANGE's long position.

The idea behind SOVEREIGN TRUST INSURANCE and NIGERIAN EXCHANGE GROUP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.